Heads roll at Sears

After a miserable fourth quarter, the retailer brings in a new chief executive and signals some management departures.

By Kim Peterson Feb 24, 2011 5:23PM
Business is incredibly bad at Sears (SHLD). But don't take my word for it. Let's hear from the chairman himself: "Our results at Sears in 2010 were completely unacceptable," writes Eddie Lampert in his annual letter to shareholders.

How bad is it? Fourth-quarter profit dropped by 13%. Same-store sales fell 4.5% at Sears locations. Gross margins were down while merchandise inventories rose. Even the company's standout business -- appliances -- saw profit erosion. The clothing and consumer electronics businesses were also on the decline. The debt picture is sketchy, with Sears issuing $1.25 billion in notes last year at 6.625% -- a higher rate than the company would have liked.

The share price dropped more than 5% on the news to $82.41 in late-afternoon trading.

Lampert makes one thing very clear: Heads are going to roll. "This requires us to part ways with some who have given great effort, but who have fallen short of the performance required for us to be competitive," he writes. I hope the appliance managers are looking at Monster.com right now.

Post continues after video:
And with some leaders heading out, Lampert is bringing in an unusual choice as chief executive: Lou D'Ambrosio, a man with zero retail experience. D'Ambrosio was previously CEO of Avaya, a telecom equipment company, and before that spent 16 years at IBM (IBM). D'Ambrosio has spent the last six months as a consultant to the Sears board.

Why is a tech guy running a retail company? Perhaps this is a clue: D'Ambrosio helped take Avaya private in 2007 in an $8.2 billion deal. Sears' own press release describes the deal as "delivering attractive returns" to Avaya shareholders.

This seems to fall in line with a trend I've written about before at Sears. The company has been buying back shares at a brisk pace, taking the number of shares outstanding to 109 million from 160 million in 2007. Three-fourths of the company is owned by three entities: Lampert, Lampert's hedge fund and another hedge fund. Sears ended its quarter Jan. 29 with $1.4 billion in cash and $9.1 billion in inventories, which total more than its $10.2 billion market cap.

All of this has some thinking that Lampert wants to take Sears private, and has tapped D'Ambrosio to make it happen. So I think shareholders can hope for one of two scenarios occurring here: Sears goes private in a deal that makes shareholders -- particularly Lampert -- happy, or D'Ambrosio uses his tech savvy to help Sears better compete with the likes of Amazon (AMZN), Home Depot (HD) and Target (TGT).

Both options are iffy, frankly. But consider this moment Sears' big Hail Mary pass. It's now or never.

Sears "is a big company long heading downhill with nobody applying the brakes," one retail analyst told MarketWatch. "And now they’ve changed the driver, but the real back-seat driver -- who controls the brakes, gas pedal, steering wheel and maintenance -- is staying the same."
257Comments
Feb 24, 2011 8:29PM
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I am 60 years old, I have had my Sears account since 1969.  I own my own business and pay my bills on time.  My credit card with Sears after hundreds of purchases at Sears over the years it was at a limit of $10,000.00 (not bad for being with them for 31 years) and recently my credit card with them was reduced to $1,500.00.  Sears is wondering what has happened to their business, especially appliances, electronics and large purchases??? If you devastate your credit card account customers, what do you expect?  Once I saw that I vowed not to purchase anything at Sears again.  Again, I have bought dozens and dozens of appliancea for me, my daughter, my father and mother and my father-in-law.  It was so convenient and the Kenmore products were very good.  Suck it up Sears Management like you wanted me to do.

I'll go to Home Depot who didn't penalize me by instantly lowering my credit card account.

Regards from an Irate EX-Sears customer

Feb 25, 2011 3:47AM
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The Biggest Problem is you treated your employees like garbage, I know I worked there for 12 years.. Your Comment heads are going to roll are proof right from the horses mouth...or should I say Pony... you force them to sell credit or get fired.. at 29% interest ... you make your employees operate in fear, especially those who have over ten years .. if they don;t sell enough credit cards, and extended warranties they go on PPI ..

   Why dont you put the blame for the loss where it belongs .. its you dude... be responsible for your position.. the bottom line is in your lap... you have screwed so many employees they nor there familys will ever shop at Sears, Kmart. Autozone ever again.. my family alone cost you over 50,000 in sales a year... Take a look at the middle east .. people dont respond well to Dictators... Why dont you buy an Island , drink ,have fun and get old . and let someone with some people skills run the company... I know its to late for that , Sears is just name in the History Books now...

Feb 25, 2011 3:13AM
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Here is your problem...  Eddie Lampert and several CEO's are from the land of OZ. It is not the workers that are the reason sales drop. The P&L are the scorecard of the executives and managers. Failure begins with the executives dropping the ball in training and support to the front line employees. Cutting payroll, technologies, supplies and advertising budgets to increase gross margins is foolishness. 

Invest in the employees with training and a income they can support themselves on and learn to operate with less overhead in administrative costs and they might be able to see some sales value to make up for the lower margins. I know it is hard to operate a large business when the shareholders are expecting a profit check and the CEO's are expecting a bonus check.  

I know, investing in the Flagship locations and treating the low producers, as stepchildren, is the good old business model. Wake up.!! All of you crocked flat-top and wig-waring CEO's...! The business plan is not working. Time to reinvent the business wheel. Sears and many other large businesses are lost everyday and the only way each can make any money is to close slow producers and fire employees like sacrificial goats. 

The majority of the CEO's are running the businesses into the ground because they can not teach, only bitch about what they created and  knowing nothing about how they missed opportunities to invest in  employees. I guess this goes to show when in doubt go to the P&L statement to get the answers from the bean counters and the guru marketers who are looking into a crystal ball, in hopes to hit the next winning lottery numbers from all the past drawings.. Good Luck...!!
Feb 24, 2011 9:18PM
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It's ridiculous to blame the salesperson.  There is far more at fault with management, policies and marketing strategy.
Feb 24, 2011 10:01PM
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Look, we are coming out of a bad recession. I have friends who had good jobs lose their homes. I go to sears and what do I see, "made in China" You can buy that crap anywhere. The large store chain to figure out that people are paying more attention than ever where things are going is going to dominate the retail industry. I grew up using Sears tools made in the USA, now, I can buy the same China crap at walmart. Wake up Sears, be a lone wolf and stock USA made goods. I know a lot of people that would be loyal customers when that happens.
Feb 24, 2011 10:13PM
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I used to work at Sears as a CSA, or Customer Service Assistant, and after 9 months of putting out product, cleaning the floors, dressing rooms, and folding tons of clothing on "The Softer Side" of Sears, I decided to start actually doing what my title said, and assisting customers. I was immediately reprimanded by my superior and told that my job was not to help a pair of distraught parents locate their missing 3 year old, my job was to keep that section of Sears looking clean. Because of this incident, I found another job and promptly quit.
Feb 25, 2011 11:03PM
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I am a proud employee of Sears.  I am a discouraged employee of Sears.  I have been with the company for 4+ years, and seen, to say the least, meager attempts at market capitalization while avoiding, sometimes at all cost, the evolution necessary to achieve even baseline success.

 Mr. Lambert, Lou, I would thoroughly enjoy a conversation with you from the sales floor.  I would show you a cross-reference of your lost 13% to the loss of my commission due to 'theoretical' inventory' being sold based on a promise date and failed deliveries.  Then multiply that issue by every other associate under the same circumstance... then by similar issues with installation failures... defective product... nonchalant call centers... you get the gist.

  I would discuss an archaic system that promotes stagnation on the floor when an associate is on hold for 45 minutes to an hour with service, simply trying to get straight answers to any given issue.  I would discuss pay in and of itself, (to be expected), when the company recovers product margin on a 'super' sale, by dropping wages to compensate... from the very people struggling every other day of the year to support a company that doesn't hesitate to abandon them in the name of, "it must be the sales force."

  You have highly skilled, trained, (unfortunately from other companies), yet loyal employees out here in the trenches.  Sometimes giving them unsustainable quotas and calling them failures spurs them forward.  Most times it simply means that line 34 of spreadsheet 960 needs to be replaced, Silence means success, after all.

  A faltering number does not mean someone isn't following the process... sometimes the process is simply flawed.  I am carrying my numbers, my clients enjoy their visits and even bring me spoils when it comes time to break in the new oven.

  And from day one, if the system is flawed... I fix the system to the best of my ability... That is until someone else notices and says, "You're only here to sell, I need you to sell, I pay you to sell."... no, actually, given a good discount, you don't.

  I will try to help Sears succeed Mr. Lambert, Lou... thanks for listening.

Feb 25, 2011 3:53AM
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   It's hard to sell product when you don't have product to sell! Sears didn't stock up for Christmas season of 2009, so Sears associates watched customers go elsewhere because they didn't have and couldn't order the products customers wanted. You can't blame the in-store associates for that.

   Combine lack of inventory, declining quality of Sears house branded products and service, and management forcing associates to use high pressure sales tactics to try to sell over-priced protection agreements, add in the low pay rates for associates that are causing the good sales people to leave Sears in droves, and you have the reason for the decline and eventual fall of Sears. Sears has been in decline due to poor upper management for years, but when the hedgies bought it, that was the final nail in the Sears coffin.

Feb 25, 2011 10:39AM
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I too have had issues with Customer Service or a lack of. I have been in the market for a gas range with convection and self cleaning options. Sears had the one I wanted and it was on sale also. I went online to order and it took forever but the stove was available at my locale or so I thought. I called the online Customer service and they said it was in stock and available at the store. Got in car drove to store with cash and met with sales associate. He tells me that model went off sale 2 days ago and I would have to pay $600 more. I told him that I verified the price, model etc. with phone call and online info. He offered no apology or anything and said price was $1400 total. I left and e-mailed the store manager, Sears customer service and any other site with complaint. Never received response from anyone. To Mr. Lambert this is why you are suffering, just like you my time and money are worth something but you are so out of touch and none of the yes men have the answers. To recapture what you had go back and treat every customer like they are your only customer. Win us back or lose us forever.
Feb 25, 2011 1:24PM
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IF Heads are going to roll at SEARS I hope that Eddie Lampert can reach around enought to lopp off his own !!!!LightningAngry
AND I work for SEARS!!!!!
Feb 25, 2011 10:44AM
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I went to Sears two weeks ago. First time I had been there in years. For a moment, thought I was at the Salvation Army. The clothes looked a mess - everything looked soooo old-fashioned, like I had stepped back in time.
Feb 25, 2011 2:27AM
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Hello people! lets get real here, job creation isn't the problem, the problem is that corporate America is sending jobs over seas without any repercussions. Until we demand that controls are placed on corporate America, this problem will not go away. There will never be enough jobs created here for those who are unemployed and the GOP knows this. They are about fortune 500 companies and how much they can rip off from the working class. They needed tax breaks so the wealthy could create jobs, remember, so where are the jobs? They have had ten years of tax breaks and they haven't been creating jobs. The only thing they are doing is taking away the working class citizens rights so that they can pay slave labor wages to American's. Start demanding that regulations be placed on corporate America before they destroy this country and our children's future.
Feb 25, 2011 4:53AM
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I'm a Sears appliance sales professional and I would like to respond to all on here.  For starters we offer the BEST in appliances when it comes to selection, pricing (we price match any local competition), and product knowledge.  With that being said, I'm updating my resume.....I believe that my company is a great company, but they need to recognize that their main profit comes from the Large Appliance Dept., and right now that business is slow with the economy being in a fragile state.  I read a comment earlier on this forum about Sears pressuring their sales staff to push getting credit and expensive protection agreements....I understand why we strive to hit those metrics, but maybe we should look at other options for gain.  Our  protection agreements are quite expensive due to the fact that they are working agreements...i.e. annual maintenance, unlimited service calls etc..... how about us offering just a plain extended warranty at a cheaper price as well, take full advantage of options for our customers.  Now, my negativity,,, I also read a comment on here about the management applying pressure to perform on associates, this is unfortunately something that does not serve well.......in my short 6 years I have been with the company, there is not 1 associate I can think of that has been hired since myself  that has kept their job longer than 2 years, so if Sears is trying to get rid of their seasoned sales professionals who have a passion for what they do,   then I say to them good luck.....the lack of respect for your largest asset may be a great downfall!  But, hey who am I to know anything about running a huge corporate business, just continue to tell me that if I don't get customer information to log into a computer so they buy online and don't come back to see me ( which makes me lose that customer for life) or I will get fired, then that's what I guess I will have to do.
Feb 25, 2011 10:58AM
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Third generation of sears appliance customer, recently ordered refrigerator. when it didn't' show up on delivery day I called it was oversold, a week later I was offered a substitute.  When it wasn't delivered I called again, my order had been cancelled , oversold again. I had not even received a call or email.  Finally after a big ordeal and 6 weeks I finally received my frig.  The most annoying part was never being able to talk to anyone that spoke english. Hello give Americans job and maybe sales would be up.
Feb 25, 2011 10:12AM
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Was an Associate at Sears years ago when they went to "All Brands". Quickly transferred to Service where we had a manager that felt women shouldn't be technicians. Well he finally found enough "little" stuff to fire me. Best thing about working  at Sears, I met my husband and we are getting ready to celebrate our 20th anniversary. The worst thing, my husband was a Senior tech that was certified and worked on EVERYTHING Sears sold. He fell off a building and hurt his back. Two years later they "Medically Terminated" him. They could have brought him back as a troubleshooter but chose to release him due to he couldn't perform as a field tech any longer.   Took us 5 years of fighting Allstate for a settlement and that was nothing compared to the pain and suffering he has had since. It didn't used to be this way. Sears took care of its employees and families but when they became "Top Dog' in the retail industry they forgot about the  working people who put them there. Sadly, Wal-Mart is headed in the same direction possibly in a shorter time.
Feb 25, 2011 2:01AM
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When shopping at Kmart, please don't blame the employees  if they seem less than helpful, believe me, they are trying. They way things are right now, there is only a few employees working at once at any given time. Each employee is left to do the work of 3 or 4 people and are being run ragged. It's sad because all these people are doing is trying to make a living by coming to work everyday. They are getting worked to death and then the customer's blame them for the lack of help around the store. Don't blame the one's who are actually there working. It's not their fault the company is too cheap to give out hours so that there are enough people to help you.

Feb 24, 2011 11:53PM
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Without a doubt, Sears has the worse customer service of any retailer I have ever dealt with.  Mr. Lampert's problem start there...change the culture of how his company treats customers, in the stores, on the phone, with complaints, servicing his products...create a culture that looks like the employees care and have a stake in what they are doing, and that will be a great start.

 

After that, I would suggest that they bring their stores into at least the 1990's (they look like they are stuck in the 1940's) and start selling things that reflect quality and economy...stop selling junk.

Feb 24, 2011 11:34PM
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I worked for Sears for 39 years and saw first hand the deterioration of a once great company.  Head in the sand arrogant management ridiculed Walmart 25 years ago and were completely satisfied to depend on credit income to carry the company. You want jeans, you have to buy Roebucks, you want appliances, you must buy Kenmore. When they finally shook the dust from their eyes it was way too late. So, let's cut costs folks, who needs trained associates, we'll just hire the first 17 year old to show up. A former CEO once said that  of all the selling space Sears has, all that matters are the two square feet where the customer and sales rep stand. Sadly, Sears forgot all about this.   
Feb 24, 2011 8:27PM
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Not surprised at all.  Their customer service has sucked for years!  Not much difference than the fall of Levitz years ago.  I grew up with Kenmore products and in my adult life, for years I wouldn't go anywhere else for my appliances.  NO MORE.  They don't give a damn about their customer base anymore. They build products that break down within a year and then charge 100.00 for a damned stovetop dial and charge an arm and a leg to have their so-called service experts (yeah, right)  come out and take a look at your brand new washing machine that doesn't work.  Basterds!   I hope they go out in flames! 
Feb 24, 2011 6:37PM
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The first thing this guy should do is shut up and visit his stores -- then he'll know why business is so bad!  They're the most depressing retail environments in the world -- the average Sears makes Dollar General look like Neiman Marcus!!  The floorplan, lighting, fixtures, and merchandise display haven't been changed since 1970.   Absolutely awful.  I went to a local Sears a few weeks ago to buy some electrical accessories and I couldn't want to get out of the store... 
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